2018 Annual Meeting. April 26, 2018

Transcription

1 2018 Annual Meeting April 26, 2018

2 Our vision and credo guide us: The destination Colleagues Mission To help our customers, colleagues and communities reach their potential Regulators Customers Investors Communities & Society Vision To be a top-performing bank distinguished by its customer-centric culture, mindset of continuous improvement and excellent capabilities We perform our best every day so we can do more for our customers, colleagues, communities and shareholders Credo We strive to always: exceed customer expectations, do the right thing, think long-term, work together We are citizens helping citizens reach their potential Brand Helping you reach your potential Narrative We are here to help our customers reach their potential by listening to them and by understanding their needs so we can deliver tailored advice, ideas and solutions 1

3 Getting to top performing Continued to raise our performance in 2017 and delivered well for all stakeholders Investors Achieved IPO-based ROTCE target of 10% (1) +; raised bar for next phase of growth TOP and BSO programs driving earnings growth and capacity for investment Returned 88% of earnings through share repurchases and common dividends (1,2) Customers Colleagues Community Regulators Recognized and awarded for customer satisfaction Temkin ratings: Top 10% of companies for consumer experience (3) Top performer in relationship manager quality, value of ideas in Commercial Enhanced digital offerings and customer-facing platforms Expanded Commercial geographic footprint Organizational Health Index increased 4 points to 68 top of second quartile Continued to attract and develop key talent and enhance culture Reached 114,000 volunteer hours and made a special $10 million contribution to further the impact we make on our communities Achieved and sustained heightened standards across broad regulatory agenda Successful CCAR submission outcome and deepened stress testing expertise Outlook remains positive to drive continued improvement for all stakeholders 1) Please see important information on Key Performance Metrics and Non-GAAP Financial Measures at the end of this presentation for an explanation of our use of these metrics and non-gaap financial measures and their reconciliation to GAAP financial measures. 2) Calculated based on Underlying results. 3) 2017 Temkin Experience Rating, U.S. March

4 Turning the corner delivered strong results in 2017 Net income of $1.6B (1) +59% Adjusted/Underlying net income of $1.3B (1,2) +28% EPS of $3.25 (3) +65% Adjusted/Underlying EPS of $2.58 (2,3) +34% ROTCE of 12.3% (2) +461 bps Adjusted/Underlying ROTCE of 9.8% (2) +219 bps Total payout of $1.1B (4) or 88% (2,5) Medium-term targets IPO-based New ROTCE (2) Efficiency ratio (2) 10%+ ~60% ~13-15% ~52-56% NIM expanded 16 bps, reflecting higher rates and our focus on balance sheet optimization Total average loans and deposits up 6%; strong growth in education, commercial real estate, mortgage and our unsecured portfolios Adjusted/Underlying efficiency ratio improved to 60%; generated positive operating leverage of 6.8% on an Adjusted/Underlying basis (2) Steady progress on our TOP programs allowed for self-funding growth investments through efficiency initiatives Continued improvement in credit metrics, reflecting the benefit of prudent underwriting standards, growth in high quality, attractive risk-adjusted retail loans and broadly stable risk profile in commercial 88% total common payout ratio on an Underlying basis (2,4) ; 91% increase in common share repurchases and 34% increase in common dividends 1) Net income available to common stockholders. 2) Please see important information on Key Performance Metrics and Non-GAAP Financial Measures at the end of this presentation for an explanation of our use of these metrics and non-gaap financial measures and their reconciliation to GAAP financial measures. Where there is a reference to Adjusted, Underlying or Adjusted/Underlying results in a paragraph, all measures that follow these references are on the same basis, when applicable. 3) Diluted earnings per common share. 4) Payout includes common dividends and share repurchases. 5) Calculated based on Underlying results. 3

5 Making consistent progress against our financial goals Strong execution against all strategic initiatives and continued momentum 4.3% ROTCE (1) (Return on average tangible common equity) 6.7% 6.1% 6.7% 6.4% 7.7% 7.6% 12.3% 9.8% New Medium-term target ~13-15% 68.5% Efficiency ratio (1) 68.7% 67.6% 68.1% 66.5% 63.9% 63.8% 60.9% 60.0% New Medium-term target ~52-56% 3Q13 (2) Q13 (2) % 2.83% NIM (1) (Net interest margin) 2.75% 2.86% 3.02% $1.04 $1.55 $1.42 EPS (1) (Diluted EPS) $1.61 $1.55 $1.97 $1.93 $3.25 $2.58 3Q13 (2) Q13 (2,3) annualized Reported results Adjusted/Underlying results (1) 1) Please see important information on Key Performance Metrics and Non-GAAP Financial Measures at the end of this presentation for an explanation of our use of these metrics and non-gaap financial measures and their reconciliation to GAAP financial measures. Where there is a reference to Adjusted, Underlying or Adjusted/Underlying results in a paragraph, all measures that follow these references are on the same basis, when applicable. 2) Commencement of separation effort from RBS. 3) Earnings per share for 3Q13 is the annualized calculation of earnings per share of $0.26 multiplied by 4. 4

6 Turning the corner delivering for customers during 2017 Consumer Enhanced our products and services to better serve our customers needs Launched new products and partnered with leading FinTech companies to offer new digital capabilities Citizens Bank SpeciFi SM Continued to modernize our branch network with ~100 branch actions completed during 2017 Received awards for our service and quality 37 point increase in J.D. Power branch satisfaction score (1) Temkin ratings: Top 10% of companies for consumer experience with second highest customer experience among banks (2) Commercial Expanded our capabilities to offer clients a broader range of services and upgraded existing capabilities Acquisition of Western Reserve Partners adds to our capital markets capabilities; expansion into new geographic markets Upgraded customer-facing platforms; introduced Escrow Agency services and launched Commercial Priority Services, a concierge service model Received awards for our service and quality Top 2 Box Score and overall customer satisfaction rating of 94% (3) 1) J.D. Power 2017 U.S. Retail Rankings Satisfaction Study, April Top 5 reflects wait times and in-person best practices for J.D. Power-surveyed footprint. 2) 2017 Temkin Experience Rating, U.S. March ) Barlow Research 2017 Voice of the Customer Survey (Top 2 Box score). 5

7 Turning the corner delivering for colleagues, communities and regulators during 2017 Colleagues Improved Organizational Health Index by four points reaching 68% (1), top of second quartile More than 2,000 colleagues transitioned to new roles while colleagues across the organization completed over 500,000 hours of training via classroom, webinar and self-paced elearning course completion Held first Career Development Month and our first Diversity & Inclusion conference Regulators Reconfirmed our CCAR capabilities with positive feedback for a third consecutive year Deepened expertise in stress testing and further integrated capital planning Communities Volunteerism up 28% to more than 114,000 hours Active members on nearly 600 community boards and committees across our footprint Continued focus on financial education in our communities, helped more than 310,000 individuals learn more about how to manage their personal finances, a 27% increase from 2016 Announced a special $10 million contribution to Citizens Charitable Foundation to further the impact we make on our communities Significant progress in remediating regulatory items and strengthening risk framework to meet heightened standards 1) The Organizational Health Index is a McKinsey survey. 6

8 9/24/14 11/30/14 12/31/14 3/31/15 6/30/15 9/30/15 12/31/15 3/31/16 6/30/16 9/30/16 12/31/16 3/31/17 6/30/17 9/30/17 12/31/17 Delivering for shareholders strong total shareholder return Well-positioned for long-term value creation. Since IPO % 19.9% vs Peers Since IPO 33.7% in % 15.5% 4.4% 57.2% 18.6% 43.2% 21.8% CFG S&P 500 Index BKX Index Peer Regional Bank Average Since the 2014 IPO, we delivered a 93% total shareholder return (1) versus 59% for peers (2) In 2017, we delivered a 20% total shareholder return (1) versus 15% for peers (2) Source: Bloomberg. 1) Total shareholder return defined as CFG common share price appreciation and assumes all dividends paid were reinvested on the date paid. 2) Peers include BBT, CMA, FITB, KEY, MTB, PNC, RF, STI and USB. 7

9 Keys to delivering higher medium-term returns TOP and Balance Sheet Optimization ( BSO ) Drive Growth in Fee Businesses Active Capital Management Enterprise-wide initiatives to drive improvement in performance; mindset of continuous improvement BSO to recycle capital into more accretive growth and relationship categories; grow higher risk-adjusted return asset portfolios, reposition/optimize other select portfolios Optimize deposit mix with a focus on lower-cost categories Consumer Wealth Leverage investments in FCs and sales, product and technology platforms Mortgage Channel and product remix toward direct-to-consumer and conforming; purchase MSRs to increase scale economies Commercial Continue to broaden Capital Markets capabilities; leverage new Global Markets platform and capabilities Treasury Replatform cash management; capture value from recent product investments Prudently grow balance sheet while driving strong returns of capital to shareholders Capture Asset Sensitivity Leverage asset sensitivity to benefit as rates rise 8

10 Key messages Executed well on our turnaround plan and turned the corner towards a new phase of growth 2017 was a successful year for Citizens Financial results exceeded expectations; achieved our IPO-based medium-term ROTCE (1) target Continued execution of strategic initiatives, mindset of continuous improvement, launched TOP IV Enhanced our consumer products and services offerings and upgraded our commercial platform and client service to help our corporate clients meet their strategic goals and financing needs Added talent to top team and in key areas; expanded our geographic footprint 2018 will be focused on things we can control Pro-growth U.S. economic outlook and policies could provide a tailwind, but we will remain focused on what we can control Key to financial results is to grow the balance sheet prudently with continued focus on building out fee businesses and delivering 3-5% positive operating leverage Continued execution of our TOP, BSO and strategic initiatives as we make steady progress on our journey to become a top-performing regional bank Continue efforts to normalize capital ratios and drive enhanced shareholder returns 1) Please see important information on Key Performance Metrics and Non-GAAP Financial Measures at the end of this presentation for an explanation of our use of these metrics and non-gaap financial measures and their reconciliation to GAAP financial measures. 9

11 Matters submitted for stockholder vote 10

12 Q&A 11

13 Appendix 12

14 Forward-looking statements and use of key performance metrics and non-gaap financial measures This document contains forward-looking statements within the Private Securities Litigation Reform Act of Any statement that does not describe historical or current facts is a forward-looking statement. These statements often include the words believes, expects, anticipates, estimates, intends, plans, goals, targets, initiatives, potentially, probably, projects, outlook or similar expressions or future conditional verbs such as may, will, should, would, and could. Forward-looking statements are based upon the current beliefs and expectations of management, and on information currently available to management. Our statements speak as of the date hereof, and we do not assume any obligation to update these statements or to update the reasons why actual results could differ from those contained in such statements in light of new information or future events. We caution you, therefore, against relying on any of these forward-looking statements. They are neither statements of historical fact nor guarantees or assurances of future performance. While there is no assurance that any list of risks and uncertainties or risk factors is complete, important factors that could cause actual results to differ materially from those in the forward-looking statements include the following, without limitation: negative economic conditions that adversely affect the general economy, housing prices, the job market, consumer confidence and spending habits which may affect, among other things, the level of nonperforming assets, charge-offs and provision expense; the rate of growth in the economy and employment levels, as well as general business and economic conditions; our ability to implement our strategic plan, including the cost savings and efficiency components, and achieve our indicative performance targets; our ability to remedy regulatory deficiencies and meet supervisory requirements and expectations; liabilities and business restrictions resulting from litigation and regulatory investigations; our capital and liquidity requirements (including under regulatory capital standards, such as the U.S. Basel III capital rules) and our ability to generate capital internally or raise capital on favorable terms; the effect of changes in interest rates on our net interest income, net interest margin and our mortgage originations, mortgage servicing rights and mortgages held for sale; changes in interest rates and market liquidity, as well as the magnitude of such changes, which may reduce interest margins, impact funding sources and affect the ability to originate and distribute financial products in the primary and secondary markets; the effect of changes in the level of checking or savings account deposits on our funding costs and net interest margin; financial services reform and other current, pending or future legislation or regulation that could have a negative effect on our revenue and businesses, including the Dodd-Frank Act and other legislation and regulation relating to bank products and services; a failure in or breach of our operational or security systems or infrastructure, or those of our third party vendors or other service providers, including as a result of cyber attacks; and management s ability to identify and manage these and other risks. In addition to the above factors, we also caution that the amount and timing of any future common stock dividends or share repurchases will depend on our financial condition, earnings, cash needs, regulatory constraints, capital requirements (including requirements of our subsidiaries), and any other factors that our board of directors deems relevant in making such a determination. Therefore, there can be no assurance that we will pay any dividends to holders of our common stock, or as to the amount of any such dividends. More information about factors that could cause actual results to differ materially from those described in the forward-looking statements can be found under Risk Factors in Part I, Item 1A in our Annual Report on Form 10-K for the year ended December 31, 2017, filed with the United States Securities and Exchange Commission on February 22, Key Performance Metrics and Non-GAAP Financial Measures and Reconciliations Key Performance Metrics: Our management team uses key performance metrics (KPMs) to gauge our performance and progress over time in achieving our strategic and operational goals and also in comparing our performance against our peers. We have established the following financial targets, in addition to others, as KPMs, which are utilized by our management in measuring our progress against financial goals and as a tool in helping assess performance for compensation purposes. These KPMs can largely be found in our periodic reports which are filed with the Securities and Exchange Commission, and are supplemented from time to time with additional information in connection with our quarterly earnings releases. Our key performance metrics include: Return on average tangible common equity (ROTCE); Return on average total tangible assets (ROTA); Efficiency ratio; Operating leverage; and Common equity tier 1 capital ratio (U.S. Basel III Standardized fully phased-in basis). In establishing goals for these KPMs, we determined that they would be measured on a management-reporting basis, or an operating basis, which we refer to externally as Adjusted, Underlying or Adjusted/Underlying results. We believe that these Adjusted, Underlying or Adjusted/Underlying results provide the best representation of our financial progress toward these goals as they exclude items that our management does not consider indicative of our ongoing financial performance. KPMs that contain Adjusted, Underlying or Adjusted/Underlying results are considered non-gaap financial measures. Non-GAAP Financial Measures: This document contains non-gaap financial measures. The appendix presents reconciliations of our non-gaap measures. These reconciliations exclude Adjusted, Underlying or Adjusted/Underlying items, which are included, where applicable, in the financial results presented in accordance with GAAP. Adjusted, Underlying or Adjusted/Underlying results, which are non-gaap measures, exclude certain items, as applicable, that may occur in a reporting period which management does not consider indicative of on-going financial performance. The non-gaap measures presented in the appendix include reconciliations to the most directly comparable GAAP measures and are: noninterest income, total revenue, noninterest expense, pre-provision profit, total credit-related costs, income before income tax expense, income tax expense, effective income tax rate, net income, net income available to common stockholders, other income, salaries and employee benefits, outside services, amortization of software expense, other operating expense, net income per average common share, return on average common equity and return on average total assets. We believe these non-gaap measures provide useful information to investors because these are among the measures used by our management team to evaluate our operating performance and make day-to-day operating decisions. In addition, we believe our Adjusted, Underlying or Adjusted/Underlying results in any period reflect our operational performance in that period and, accordingly, it is useful to consider our GAAP results and our Adjusted, Underlying or Adjusted/Underlying results together. We believe this presentation also increases comparability of period-to-period results. Other companies may use similarly titled non-gaap financial measures that are calculated differently from the way we calculate such measures. Accordingly, our non-gaap financial measures may not be comparable to similar measures used by other companies. We caution investors not to place undue reliance on such non-gaap measures, but instead to consider them with the most directly comparable GAAP measure. Non-GAAP financial measures have limitations as analytical tools, and should not be considered in isolation, or as a substitute for our results as reported under GAAP. 13

15 Key performance metrics, Non-GAAP financial measures and reconciliations $s in millions, except share, per share and ratio data FULL YEAR Quarterly Trend 2017 Change Q13 $/bps % Noninterest income, Adjusted/Underlying: Noninterest income (GAAP) $1,534 $1,497 $1,422 $1,678 $37 2 % $383 Less: Special items Less: Notable items (61) (91) - Noninterest income, Adjusted/Underlying (non-gaap) $1,528 $1,430 $1,422 $1,390 $98 7 % $383 Total revenue, Adjusted/Underlying: Total revenue (GAAP) A $5,707 $5,255 $4,824 $4,979 $452 9 % $1,153 Less: Special items Less: Notable items (61) (91) - Total revenue, Adjusted/Underlying (non-gaap) B $5,701 $5,188 $4,824 $4,691 $ % $1,153 Noninterest expense, Adjusted/Underlying: Noninterest expense (GAAP) C $3,474 $3,352 $3,259 $3,392 $122 4 % $788 Less: Restructuring charges Less: Special items Less: Notable items Noninterest expense, Adjusted/Underlying (non-gaap) D $3,419 $3,316 $3,209 $3,223 $103 3 % $788 Net income, Adjusted/Underlying: Net income (GAAP) E $1,652 $1,045 $840 $865 $ % $144 Add: Restructuring charges, net of tax expense (benefit) Add: Special items, net of income tax expense (benefit) (147) Add: Notable items, net of income tax expense (benefit) (340) (19) - - (321) NM - Net income, Adjusted/Underlying (non-gaap) F $1,312 $1,026 $871 $790 $ % $144 Net income available to common stockholders, Adjusted/Underlying: Net income available to common stockholders (GAAP) G $1,638 $1,031 $833 $865 $ % $144 Add: Restructuring charges, net of tax expense (benefit) Add: Special items, net of income tax expense (benefit) (147) Add: Notable items, net of income tax expense (benefit) (340) (19) - - (321) NM - Net income available to common stockholders, Adjusted/Underlying (non-gaap) H $1,298 $1,012 $864 $790 $ % $144 Operating leverage: Total revenue (GAAP) A $5,707 $5,255 $4,824 $4,979 $ % $1,153 Less: Noninterest expense (GAAP) C 3,474 3,352 3,259 3, Operating leverage 4.98 % Operating leverage, Adjusted/Underlying: Total revenue, Adjusted/Underlying (non-gaap) B $5,701 $5,188 $4,824 $4,691 $ % $1,153 Less: Noninterest expense, Adjusted/Underlying (non-gaap) D 3,419 3,316 3,209 3, Operating leverage, Adjusted/Underlying (non-gaap) 6.80 % Efficiency ratio and efficiency ratio, Adjusted/Underlying: Efficiency ratio C/A % % % % (293) bps % Efficiency ratio, Adjusted/Underlying (non-gaap) D/B (396) bps

16 Key performance metrics, Non-GAAP financial measures and reconciliations $s in millions, except share, per share and ratio data FULL YEAR Quarterly Trend 2017 Change Q13 $/bps % Return on average tangible common equity and return on average tangible common equity, Adjusted/Underlying: Average common equity (GAAP) I $19,618 $19,698 $19,354 $19,399 ($80) % $19,627 Less: Average goodwill (GAAP) 6,883 6,876 6,876 6, ,876 Less: Average other intangibles (GAAP) Add: Average deferred tax liabilities related to goodwill (GAAP) Average tangible common equity J $13,267 $13,322 $12,919 $12,893 ($55) % $13,067 Return on average tangible common equity G/J % 7.74 % 6.45 % 6.71 % 461 bps 4.34 % Return on average tangible common equity, Adjusted/Underlying (non-gaap) H/J bps 4.34 Return on average total tangible assets and return on average total tangible assets, Adjusted/Underlying: Average total assets (GAAP) K $149,953 $143,183 $135,070 $127,624 $6,770 5 % $117,386 Less: Average goodwill (GAAP) 6,883 6,876 6,876 6, ,876 Less: Average other intangibles (GAAP) Add: Average deferred tax liabilities related to goodwill (GAAP) Average tangible assets L $143,602 $136,807 $128,635 $121,118 $6,795 5 % $110,826 Return on average total tangible assets E/L 1.15 % 0.76 % 0.65 % 0.71 % 39 bps 0.52 % Return on average total tangible assets, Adjusted/Underlying (non-gaap) F/L bps 0.52 Net income per average common share - basic and diluted, Adjusted/Underlying: Average common shares outstanding - basic (GAAP) M 502,157, ,093, ,599, ,674,146 (19,936,105) (4%) 559,998,324 Average common shares outstanding - diluted (GAAP) N 503,685, ,930, ,220, ,724,936 (20,245,627) (4) 559,998,324 Net income per average common share - basic (GAAP) (1) G/M $3.26 $1.97 $1.55 $1.55 $ $1.04 Net income per average common share - diluted (GAAP) (1) G/N Net income per average common share - basic, Adjusted/Underlying (non-gaap) (1) H/M Net income per average common share - diluted, Adjusted/Underlying (non-gaap) (1) H/N Common payout ratio and common payout ratio, Underlying Dividend to common stockholders $322 Treasury stock purchased 820 Total payout O $1,142 Common payout ratio O/G 70 % Common payout ratio, Underlying (non-gaap) O/H 88 (1) Earnings per share for 3Q13 is the annualized calculation of earnings per share of $0.26 multiplied by 4. 15

17